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The 



C^ttfe^ 



SITUATION 



BUREAU OF AGRICULTURAL ECONOMICS 
UNITED STATES DEPARTMENT OF AGRICULTURE 



CS-47 




September 1940 



COTTON, AMERICAN: WORLD SUPPLY AND CONSUMPTION, 1920-40 



RUNNING 

BALES 
( MILLIONS ) 

25 



20 



Supply < 



{U. S. loan stocks 
Other U. S. stocks 
Foreign countries 1 
U. S. production -W 



—Foreign countries I 



United States 



15 



10 




1920 1922 1924 



1926 1928 1930 1932 1934 1936 1938 1940 

YEAR BEGINNING AUGUST 



*LOAN STOCKS ON MAY 50, 1955 



* PRELIMINARY 



0. S. DEPARTMENT OF AGRICULTURE 



NEG. 38598 



BUREAU OF AGRICULTURAL ECONOMICS 









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The 1940-41 season is the fourth consecutive year that the world sup- 
ply (carry-over plus production) of American cotton has been close to 25 
million bales. except for 1931-33 a no 1926 the supply never before exceed- 
ED 21 MILLION BALES. In THE LAST 3 YEARS THE CARRY-OVER HAS CONSTITUTED 
50 PERCENT OR MORE OF THE SUPPLY, WITH 50 T 78 PERCENT OF THE CARRY-OVER 
CONSISTING OF GOVERNMENT LOAN STOCKS. 

THE NEAR-RECORD CONSUMPTION IN THE UNITED STATES LAST SEASON LARGELY 
OFFSET THE LOW CONSUMPTION OF AMERICAN COTTON IN FOREIGN COUNTRIES, THE 
WORLD TOTAL BEING ABOUT AVERAGE. WORLD CONSUMPTION DURING THE CURRENT 
SEASON NOW SEEMS LIKELY TO DROP CONSIDERABLY BELOW AVERAGE EVEN WITH A 
RECORD HIGH DOMESTIC UTILIZATION. 



CS-47 - 2 - 

THE C T T I T SITUATION 

Summary 

With shipments largely confined to three countries, Great Britain, 
Japan, and Canada, exports of American, cotton for August and September are 
likely to total only about 125,000 bales. This compares with £70,000 bales 
last year and a 10-year average "of close to 1 million bales. It is the lowest 
for these months for more than 60 years. Without a marked increase in the sea- 
sonally adjusted rate, exports for the season (including cotton traded to 
Great Britain for rubber) will not reach 2 million bales. Through a reduction 
in stocks, foreign consumption of American cotton, however, is expected to 
greatly exceed exports from the United States. 

In contrast with the exceptionally unfavorable export situation, con- 
sumption prospects in the United States are very favorable. In August, do- 
mestic mill consumption established a record all-time high for that month. 
With improved manufacturers' sales and higher mill margins, consumption this 
month may establish a record high for September. With large Government defense 
purchases, improved business conditions, and larger Government subsidies on 
cotton textiles to domestic and foreign consumers, domestic mill consumption 
for the season seems likely to materially exceed 8 million bales. The record 
high, established in 1936-37, is just short of 8 million bales . Last season 
consumption totaled 7,750,000 bales. 

Despite the high level of domestic consumption, disappearance of American 
cotton (consumption plus exports) in August was unusually small. The same will 
also be true for September. This, and an increase of 1-1/3 million bales in 
domestic crop prospects in August, contributed to the decline in spot prices 



CS-47 - 3 .- 

during August and early September. Even with ginnings to September 16 loss 
than half as large as to the same dato last season, ginnings materially exceed- 
ed domestic disappo arance and increased the stocks of raw cotton available to 
domestic merchants and manufacturers. 

The September estimate of the 1940 domestic crop of 12,772,000 bales of 
500 pounds gross weight is nearly 1 million bales larger than the 1939 crop. 
This estimate in terras of running bales, plus a world carry-over of just over 
12-1/2 million bales, gives an indicated world supply. 7 " of American cotton of 
nearly 25-1/4 million bales, including 2 million bales in foreign countries on 
August 1 last. This makes the fourth consecutive year that the world supply of 
American cotton has boon close to 25 million bales. With the exception of 1931- 
33 end 1926, the world supply of American cotton never before those years ex- 
ceeded 21 million bales. 

Such data as arc now available indicate that the 1940-41 world supply 
of foreign cotton will equal or exceed that of the previous season. It prob- 
ably will not be greatly different from the 23 to 26 million bale supply of 
each of the past four seasons. 

On August 1 the United States Government owned or hold as collateral 
against loans about 8-3/4 million bales of the 1940 carry-over,. On September 20, 
Government holdings totaled 8,600,000 bales, including 46,000 bales from the 
1940 crop. In view of the exceptionally unfavorable export outlook, Govern- 
ment holdings of 1940 crop cotton are expected to increase greatly during the 
noxt 3 months. This increase will be offset to some extent by the shipment of 
cotton which was traded to Great Britain for rubber in the summer of 1939. 

— September 2 7, 1940 



CS-47 - 4 - 

PRICES 

United States: Spot prices decline, 
future s advance 

Domestic prices of spot cotton continued to decline up to the middle of 
September, as had been the case in each of the 2 preceding months. Prices of 
New York futures contract, on the other hand, advanced during this period. The 
decline of approximately l/2 cent in spot prices between mid-August and mid- 
September, along with a slight advance in futures quotations, materially chang-- 
ed the spot-future price relationship. On August 16 the average spot prices 
in the 10 markets averaged from 3/4 to 1-1/4 cents above New York futures 
quotations for the 6 active contract months, but on September 16 averaged only 
0.07 to 0.63 cents above. Py September 25 futures quotations were 1/4 to l/3 
cent above those of September 16, and l/3 to 2/5 cent above those of August 16, 
Despite a slight increase in spot prices the 10-market. average on September 25 
was from 0,07 cent below to 0,41 cent above New York futures. 

The change in the spot-future price relationship during the past few 
weeks was largely due to the adjustment of both spots and futures more nearly 
to the 1940 loan rates. The average 1940 loan rate for Middling 15/16" in the 
10 markets is 9.3 cents. Earlier in the season spot prices were being held 
above the loan rate by the relatively small stocks of cotton in trade channels. 
But, despite the exceptionally snail ginnings to September 16 and the record 
or near-record rate of domestic consumption, stocks of cotton not under Govern- 
ment ownership or under loans were much larger in late September than a month 
earlier. 

With the decline since early September in the possibilities of German 
invasion of Great Britain and further improvements in United States business 
conditions, domestic prices of securities and a number of important commodities 
have strengthened. These developments contributed to the recent advance in 
cotton futures contract prices, which occurred even though the official esti- 
mate, released on September 8, indicated a 1940 United States crop 1-1/3 
million bales larger than the August estimate. 

Foreign countries: Spot prices advance 
in Liverpool, Bombay, and Sao Paulo 

Prices of spot cotton in Liverpool, Bombay, and Sao Paulo advanced some- 
what during the past month. On September 20 American Middling, fair staplo, 
in Liverpool averaged 14.09 cents. This was about 3/8 cent higher than a month 
earlier and the highest for any Friday since last February. It was nearly 3 
cents higher than the September 1939 average. The Liverpool prices of Indian 
Oomra and Brazilian Sao Faulo were also higher on September 20 than for many 
weeks. Prices of Egyptian Uppers continued strong and except for the preceding 
few weeks were higher than for more than a decade. 

Prices of Indian ( Oomra) at Bombay and Brazilian (Type 5) at Sao Paulo 
were somewhat higher on September 20 than a month earlier and approximately 
equal to or higher than at any time since early June, (See accompanying table). 
These advances, along with the decline in spot prices in the United States, 



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CS-47 



- 7 - 



Cotton: Spot price per pound and spread between prices in specified markets, 
10-year average 1927-28 to 1936-37 and 1936-37 to" date 



Season 5 - 

month 

or day 



10-yr. av. 
1927-28 to 
1936-37 
1936-37 
1937-38 
1938-39 
1939-40 

Aug. . 

Sept . 

Oct. 

Nov. 

Dec. 

Jin. 

Feb. 

March 

April 

Hay . 

June 

July 
1940-41 

Aug. . . , 

Aug. 2 
o 

16 

23 
30 
Sept. 6 
13 
20 



American Middlin g 



: Spread: Spread 
: of : of 
New :Live r - : saka 
Or- : pool : over 
leans: over : New 

:New Or- : Orleans 
•.leans l/: 1/ 



Indian 



: Spread: 

: of : Spread 

:Liver- : of 
Eom- -, n , 

: pool : Osaka 

^ : over : over 

: Bombay : Bombay 

« \L ■■ 



Brazilian 



Sao \ 
Paulo ' 



: Spread 
: of 
: Liver- 
pool 

over 
Sao 
^ aulo l/ 



Egyptian Upp ers" 



Alex- ; 
andria' 



Cents Cents Cents Cents Cents Cents Cents Cents Cents 



: Spread 

: "of 

: Liver- 
pool 
over 

: Alex- 

:andrial/ 



C - ' a 



12.99 1.51 1-75 10.06 1.13 1.31 14.11 -.03 15-34 1.78 



13-45 
9.24 

9.04 

10.23 

9.18 

9.22 

9.12 

' 9.60 

10.84 

10.98 

10. S7 

10.63 

10.74 

10.25 

10.74 

10.55 

9.92 
10.30 
10.10 
9. 85 
9.70 
9.65 
'9.56 
9.45 
9.50 



1.17 

1.07 
1.11 
2.41 
• 98 
1.99 
1.53 
2.06 
3-30 
3.83 
2.87 
2.43 
2.73 
2.70 
1.87 
2.70 

3.58 
2.81 
3-05 
3.89 
4 . 02 
4.15 
4.41 
4.49 
4.59 



2.30 

3-46 

2/1.93 

3/ 

2.39 
3/ 

2.99 
2.97 
2.73 
2.57 
2.13 



2.39 

1 

5/2.39 

3/ 
3/ 

3/ 



10.08 
7.27 
6.57 
8.14 
6.76 
7.33 
7.46 
8.61 
10.50 
10.46 
9.16 
8.78 
8.82 
7.69 
5.84 
6.24 

6.49 
6.60 
6.53 
6.53 
6.36 
6.44 
7.23 
6.81 



-.79 

.69 

.57 

1.80 

.62 

1.23 

.95 

.85 

1.19 

1.85 

1.93 

1.90 

1.88 
2.54 
3.53 
3.22 

3.27 
2.93 
3.08 
3.42 
3.47 
3.45 
2.85 
3-15 
3.44 



1.50 
2.68 
.33 
2/ 



3/ 

% 

.79 

3/ 

.90 

.61 

.06 

-.02 

1.05 

1.53 



5/1.88 

~ 3/ 
3/ 
3/ 
3/ 
3/ 



12.95 
9.26 

8.40 

9.04 

7.72 

8.69 

8.73 

9.76 

11.91 

11 . 35 

10.70 

9.69 

8.87 

7.58 

6.69 

6.79 

6.43 

6.37 
6.62 
6.57 
6.45 
6.40 
6.44 
6. 64 
7.05 



1.17 
.92 
1.23 
3.45 
1.65 
2.02 
1.72 
1.33 
2.23 
8.52 
3-24 
3.54 
4.60 

5-37 
5.74 
5.92 

6.62 

6.33 
6.11 

6.75 
6.85 
7.07 
7.03 
6.79 
6.53 



15-46 
10.96 
' 9.92 

3/ 

9.12 

9.34 

9.14 
10.37 
13.26 
15.10 
14.75 
14.92 
15.13 

4/14.77 

~~ 3/ 
3/ 

3/ 
3/ 
1/ 
3/ 

3/ 

3/ 



1.94 

2.14 
1.88 

3/ 
2.23 
3.15 

2.89 
2.33 
2.54 
2.40 
2.39 
2.25 
2.51 

3/ 

3/ 
3/ 
3/ 
3/ 

3/ 
3/ 
3/ 
3/ 



Prices at Mew Orleans are from records of the Agricultural Marketing Service. 
Prices at Bombay are from Bombay Cotton Annual and Financial News through March 
1940 3 since then from Mew York Cotton Exchange reports. They were converted from 
rupees per candy of 784 pounds at current rates of exchange (buying rates in recent 
weeks) as reported by the Federal Reserve Board. 

Prices at Sac Paulo are from official publications and cables. Prices were 
converted from milreis per 15 kilograms at current rates of exchange until Sect. 
1934, Oct. 1934 to Feb. 10, 1935 at open or free market rates, and from Feb. 11 to 
date, at composite averages of official and free market rates; except from Nov. 16, 
1937 through Apr. 10, 193° when free market rates were used. Prices at Alexandria 
are from the Monthly Bulletin of Agricultural and Economic Statistics. Prices were 
converted from tallaris per cantar at current monthly rate of exchange through Aug. 
1939; since Sept. 1939 converted at official rate of exchange. 

1/ See preceding table for prices at Liverpool and Osaka. 2/ Based on average price 
for 10 months. The 10-month average price at New Orleans was 8.91 cents and at Bom- 
bay was 6.48 cents. 3/ Not available. 4/ Price on May 9, latest date available. 
5/ Based on monthly prices. 



CS-47 - 8 - 

reduced the spread between prices at Few Orleans and those in Boribay and Sao 
Paulo. On September 20, American middling 15/16" at Ilex; Orleans was about 
2-3/4 cents higher than both the price of Indian Oomra at Bombay and Brazilian 
at Sao Paulo • In August the spread ranged from 3-1/4 to almost 4 cents above 
prices in these two foreign export markets. 

Price changes in Liverpool v, r ere not in keeping with changes in these 
three export markets. In Liverpool the price of Indian and Brazilian changed 
almost in oroportion with changes in the price of American. As a result, the 
ratio of the price of American to the price of these two important competitive 
growths showed little change. Prices in Liverpool have been materially af- 
fected in recent weeks by the uncertainty of the war and the difficulties and 
uncertainties as to future supplies. Since the beginning of the more in- 
tensified aerial warfare several weeks ago, prices of most important cottons 
in Liverpool have increased relative to prices of such growths in the export- 
ing countries. On September 20 the price of American Middling fair staple at 
Liverpool was 4-3/5 cents higher than American Middling 15/16" at New Orleans, 
whereas in early August the spread was about 3 cents. During the same period 
the spread of the prices of Indian and Brazilian cotton in Liverpool over the 
prices of these growths in Bombay and Sao Paulo increased from 2.93 and 6.33 
cents on August 2 to 3.44 and 6.53 cents on September 20. 

Recent reports from Japan and China state that prices of American cotton 
are materially below normal in relation to prices of Indian and Brazilian cot- 
ton in Shanghai and Osaka. In Canada and Spain, Brazilian cotton of more or 
less similar quality to American is reported to have been contracted for re- 
cently at prices 10 to 15 percent lov;er than American. 

EXPORTS 

America n cotton: Restricted outlets reduce 
shipments 70 to 80 percent - 

In August exports of American cotton, which were largely confined to 
Great Britain, Japan and Canada, totaled only 65,000 running bales, according 
to data released by the Bureau of Foreign and Domestic Commerce. This was 70 
percent less than the relatively small exports in August 1939 and 78 percent 
less than the 10-year (1928-37) August average. During the first 3 weeks of 
September, the 59,000 bales of American cotton exported were 80 percent below 
the corresponding period last year, and lower still in relation to the average 
for these weeks. It now seems likely that exports for August and September 
combined will not exceed 125,000 bales. Last year exports during these 2 
months totaled 878,000 bales and during the 10 years ended 1937 averaged 
966,000 bales. Hot since 18 79 have exports for these 2 months combined been 
as small as this year. Unless there is a marked increase in the seasonally 
adjusted rate of exports, the total for the season will fall far short of 2 
million bales including cotton traded to Great Britain for rubber. Last season 
the total was 6,200,000 bales and was itself 600,000 bales less than the 1928- 
37 average. 



CS-47 



- 9 - 



Cotton: Exports from specified countries, average 1928-29 to 1937-38, 

and seasons 1937-38 to date 









Aug . 










Aug 


. 






:10- 








: 1940 


:10- 






: 1940 


Country of 

origin and 

d e st i - 


: yr . av. 
:1923- 
:29 to 


1938 


1939 


1940 


: as 
: a 
:pct . 


[Country of 
origin and 


: yr.av.: 
:1928-: 
:29 to:^ 


!l939 ! 


: as 

1940 ! P ct. 


nation 


:1937- 
: 33 








: of 
:1939 


* nation 


:2939 

: 38 






: of 
:1939 




: 1,000 


1,000 


1,000 


1,000 






:1,000 1,000 


1 , 000 


1,000 


United 


: bales 


bales 
1/ 
26 


bales 

1/ 
18 


bales 
1/ 



Pet. 


lEgjrpjt. to- 
United 


:bale 


s bales 
1/ 


bales 


bales Pet. 


States to- 
Germany 


: 1/ 
: 59 


1/ 


1/ 


United 












Kingdom 


2( 


D 25 


28 


— 


Kingdom 


: 49 


24 


72 


47 


65.3 


France : 


11 


13 





France 


: 36 


22 


33 








United : 










Italy 


25 


14 


13 





: 


St etc s : 


1 


5 2 


3 


17 566.7 


Spain 


12 


1 


11 





— : 


Germany 2/: 


! 


3 18 


12 


--- 


Belgium 


6 


5 


8 








Italy : 


] 


5 8 


8 


— - 


Canada 


9 


15 


9 


7 


77.8 . 


Jan an : 


r 


3 13 


13 


1 7.7 


Japan : 


48 


53 


28 


6 


21.4 : 


British : 










China : 


16 





3/ 





: 


India : 


i 


2 4 


5 


6 120.0 


Other : 












Other : 










countries: 


34 


41 


" 23 


5 


21.7 : 


countries: 

Total : 


22 . 26 


24 





Total : 


294 


201 


215 


65 


30.2 : 


77 108 


106 


24 22.6 
















Aug. - Jl 


iiy 






10-yr.av. : 








: 1939-40 






A 


ug. 






1928-29 : 1 
to : 


937- 
38 


1938- : 
: 39 : 


1939- 
40 


: as a 
: pet . 


Anglo : 












1937-38 : 








:of 1933-39 


Egyptian 
Sudan to 






















Unitea 

Kiftgdom : 


4/ 


14 


7 


8 


114.3 


. 4/ 


154 


212 


44 


20.8 


France : 


4/ 


1 


1 








.4/ 


17 


24 


24 


100.0 


Italy : 


47 


3/ 


1 








11 


9 


11 


9 


81.8 


India : 


4/ 


6 


5 


22 


440 . 


4/ 


76 


52 


59 


113.5 


Other : 






















countries: 


4/ 


1 


g 


4 


200.0 


4/ 


22 


42 


11 


26.2 


Total : 


8 


22 


16 


34 


212.5 


165 


278 


341 


147 


43.1 


Brazil to : 




Ju 


ly 








Ai 


ig. - Ju 


lv 


— 


Jap an : 


4/ 


60 


47 


40 


85.1 


4/ 


204 


406 


219 


53.9 


United : 




















; 


Kingdom : 


4/ 


19 


29 


22 


75.9 


4/ 


203 


229 


295 


128.3 


Germany : 


4/ 


48 


86 








4/ 


508 


338 


70 


20.7 


France : 


4/ 


31 


44 








4/ 


88 


177 


56 


31.6 


Italy : 


4/ 


4 


17 








V 


15 


76 


26 


34.2 


Netherlands: 


4/ 


5 


11 








V 


21 


48 


37 


77.1 


Belgium : 


4/ 


1 


6 








4/ 


27 


32 


22 


68.8 


Other : 






















countries: 


4/ 


9 


78 


48 


61.5 


4/ 


81 


303 


258 


85.1 


Total 


60 


177 


313 


110 


34. G 


447 1 


,147 


1 ,609 


963 


51.1 



Compiled from offi 
as half bales) and 
January 1938. 3/ 



cial sources. IT American in running bales (counting round bales 
foreign in bales of 478 pounds. 2/ Includes Austria beginning 
Less than 500 bales. 4/ Not available by countries. 



CS-47 - 10 - 

The most important factor now restricting domestic exports is the more 
or less complete blockade of continental Europe, excepb for Russia* Last sea- 
son the United States exported 2-1/3 million bales to this area, even though 
parts of the region were blockaded after the beginning of the war in September. 
In the 5 years ended July 1939 the mills of this area consumed an average of 
2,500,000 bales of American cotton. Furthermore, about the same amount of 
other imported cotton was consumed. This means that even in the few remaining 
accessible markets, American cotton is meeting increased competition from othe? 
exporting countries, One important indication of this increased competition 
is the relatively low prices of foreign cottons, as -shown in the preceding 
section. Reduced exports and civilian consumption of cotton textiles in 
England and Japan, and larger stocks of raw cotton at the beginning of the sea- 
son in these markets, are also contributing to the reduced exports of American 
and foreign cotton. Restricted freight allotments to Great Britain are also 
a factor in the low level of current exports • 

Foreign cotton: Egyptian and Brazilian export s 
also greatly restricted 

Exports of cotton from Egypt, which totaled only 24,000 bales in August 
were less than one-fourth as large as in August last year or the year before. 
This was true even though exports to the United States were about six to eight 
times as large as in August 1938 and 1939. Rot only were there no Egyptian 
exports to continental Europe, but the lack of shipping allotments prevented 
any cotton from moving from Egypt to the United Kingdom. Recent reports state 
that arrangements were being made to provide shipping space for the movement 
of Egyptian cotton to Great Britain. 

Exports from Brazil during July 1940 were only 35 percent as large as 
in July last year, according to data recently received by cable from Sao Paulo, 
From August through July Brazilian exports were two-fifths less than in the 
corresponding period last season. A scarcity of transportation facilities is 
also restricting Brazilian exports. A recent radiogram from Shanghai states 
that except for transportation problems Japanese buyers would be purchasing 
considerably larger quantities of Brazilian cotton and less American, as a 
result of the wide price disparities. 

DEMAND A1ID COBSUMFTIOB 

UNITED STATES : Augus t consumpt ion highest on record 
for the month; outlook bright" 

Domestic mill consumption of 655,000 bales in August was 4 percent 
larger than in August last year, the largest for the month on record, and 10 
percent above July. This increased the seasonally adjusted index of consump- 
tion to 124, from 116 in July and 114 in August last year. 

Comparatively large orders for cotton goods have been placed by Govern- 
ment agencies during the past few weeks. This and expanding general business 
conditions along with a continued high level of retail sales contributed to th< 
large sales of unfinished cotton goods by domestic manufacturers during 



CS-47 - 11 - 

September. These sales materially increased manufacturers' unfilled orders 
and strengthened cotton textile' prices. As a result, cotton consumption ad- 
justed for seasonal variation in September will probably equal or exceed that 
of August, Trade reports indicate that domestic mills are now in a strong 
statistical position from the standpoint of unfilled orders. Most mills are 
said to have sufficient orders booked to insure an exceptionally high rate of 
activity until the end of the calendar year. 

The demand for domestically produced cotton goods is expected to con- 
tinue strong and result in a new record high domestic mill consumption of 
cotton during the 1940-41 season. Consumption is likely to materially exceed 
8 million bales compared with 7-3/4 million bales last season and a record 
high of just under 8 million in 1936-37. This is due to: (l) large Government 
purchases of cotton products for defense purposes, (2) an expanded Government 
cotton products export subsidy program, (3) increased incomes of domestic con- 
sumers, (4) large Government subsidies to domestic consumers of cotton and 
cotton textiles by such means as the Stamp Plan, Mattress Program, and the 
Cotton Insulation Program, Cotton Paper Program, and Cotton Bagging for Cotton 
Bales, and (5) other increased Government efforts as well as increased efforts 
of private organizations to stimulate cotton consumption. These latter ef- 
forts include advertising and other promotional activities, as well as in- 
creased research designed to discover new or more attractive uses for cotton 
and more efficient manufacturing methods. 

BUR OPE : Cotto n consumption declines in Great Britain, 
greatly restricted on the Continent 

British mill activity declined somewhat further during the past month 
and is now probably 10 to 12 percent lower than in June or early July. It is 
still relatively high. However, because of the large output of goods for 
military purposes, sales of cotton goods by British mills are reported to have 
been quite small during the last few weeks, except for Government contracts. 
Cotton textile export sales were reported as having been very small, with 
foreign buying being retarded by the question of whether deliveries could be 
made according to schedule and by talk of price reductions on cotton goods for 
export. Current exports of cotton textiles are estimated not in excess of 
5,500,000 pounds of yarn and 80 million square yards of cloth monthly. Dur- 
ing the last full year prior to the outbreak of the war, when export data were 
discontinued, monthly exports of yarn and cloth averaged 11 million pounds and 
120 million yards, respectively. Textile mills were reported still losing 
ground on stocks and orders during the week ended September 20. 

Cotton mill consumption in continental Europe is believed to be running 
at a low level, because of a shortage of raw cotton. This seems likely even 
though continental European imports of raw cotton during the year ended July 
1940 were quite large - a development which occurred despite the blockade of 
considerable proportions of the area during most of the season. With the high 
rate of consumption existing last season in the importing areas, together with 
the extremely small stocks at the beginning of the 1939-40 season, stocks of 
raw cotton in these areas probably were not large even at the time the blockade 
was extended to them. In such areas, at least a part of the stocks on hand at 
the time of the extension of the blockade to the area has no doubt since been 
distributed to other mills under German and Italian control. 



CS-47 - 12 - 

In Spain reports indicate that supplies of raw cotton have recently 
dwindled to a very low level. This is apparently due to the lack of foreign 
exchange with which to purchase raw cotton. On September 5, however, finan- 
cial arrangements were concluded for the importation of considerable quan- 
tities of cotton* These arrangements are believed to cover contracts for 
lOOjOOO bales of Brazilian cotton and to allow for additional purchases up to 
50,000 bales. During August the Spanish Cotton Board awarded contracts to 
four Brazilian concerns covering purchases of about 100,000 bales of Brazilian 
cotton at prices 10 to 15 percent lower than the existing prices of comparable 
grades of American cotton, according to information cabled from Madrid in 
early September. Shipments of this cotton were to begin early in September 
and payments were to be made over varying periods of from 6 to 18 months. 

0RIE T !T : Cotton mill consump tion further 
reduce d in Japan and China 

Cotton yarn production by Japanese mills in August totaled approximate- 
ly 170,000 bales of 400 pounds, including cotton content of the 14,000 bales 
of mixed yarn produced. This was somewhat smaller than the 177,000 bales 
produced in July and 20 percent less than production in August 1939. Raw cot- 
ton consumption changed about the same as yarn production. 

Exports of cotton cloth from Japan totaled 115 million square yards in 
August, compared with 117 million in July. This was 50 percent less than the 
223 million yards exported in August 1939 and, with two exceptions, was the 
smallest monthly total since February 1932. 

Cotton mill activity in Shanghai was further reduced in August, as 
stocks of yarn piece goods continued to increase and textile markets, both at 
home and abroad, remained restricted. Japanese mills were reported to have 
been operating at about 65 percent of capacity, Chinese at 70, and British at 
47 percent. In July, activity in these mills was estimated at 70, 75, and 70 
percent respectively « Mils in other parts of "occupied" China and in 
Manchuria continued at about the same low rate as in July (less than 50 per- 
cent), while those in Chinese controlled areas maintained operations at about 
80 percent. Total mill consumption in China, including Manchuria, during 
August was estimated at about 115,000 bales, compared with 122,000 bales in 
July and 120,000 bales in August 1939. 

The recent declines in cotton mill consumption have been due to the 
large accumulation of yarn stocks resulting from speculative hoarding induced 
by depreciation of the Chinese currency and expectations of increased exports 
to :■ ...-kets formerly supplied by Europe. More recently, considerable in- 
creases in stocks of piece goods have occurred, following the tightening of 
the blockade of important interior markets by the Japanese and by additional 
import restrictions in British, French, and Netherlands Empire areas. 



CS-47 - 13 - 

ACREAGE, PRODUCTION, STOCKS, AND SUPPLY 

AMERICAN COTTON : 1940-41 supply about same 
as in 3 preceding years 

The September estimate of the 1940 domestic crop of 12,772,000 bales 
(500 pounds gross weight) is 1,345,000 bales larger than the August estimate 
and nearly 1 million bales larger than the crop of either of the 2 preceding 
years. This estimate in terms of running bales plus a world carry-over of 
just over 12-1/2 million bales gives an indicated 1940-41 world supply of 
American cotton of nearly 25-1/4 million bales • Such a supply is about the 
same as the 24-1/2 to 25-1/2 million bale supply of the three preceding sea- 
sons. In only 4 years prior to 1957 (1926, 1931, 1932 and 1936) have supplies 
been nearly as large as in the last 4 years. With the exception of these 8 
years the annual supply has never exceeded 21 million bales. 

Despite the prospective larger crop, ginning s to September 16 were less 
than half as large as to the same date last year, and considerably smaller 
than in any year since 1924, when ginnings to this date were first recorded. 
According to the Crop Reporting Board, "Picking began about 2 weeks later than 
usual in the States adjacent to the Mississippi River and about a week late 
in Georgia, Alabama, Oklahoma, and Tuas," This apparently accounts for the 
unusually small ginning:; to September 16 in relation to the estimated produc- 
tion. 

FOREIGN COTTO N: Supplies of India n and 
Egyptian cotton larger 

Very tentative estimates of the production and carry-over of Indian and 
Egyptian cotton indicate that the supply of each for 1940-41 will be larger 
than in 1939-40. Recent estimates released, by the Now York Cotton Exchange 
Service indicate a commercial supply cf Indian cotton of about 7,690,000 bales 
of 478 pounds, compared with 7,310,000 bales for the preceding season. The 
estimated supply of Egyptian cotton was placed at 2,785,000 bales, or about 
100,000 balos larger than that of 1939-40. 

With the total 1940 cotton crop in China, including Manchuria, esti- 
mated at about 300,000 bales larger than the unusually email 1939 crop, and a 
larger crop expected in northern Brazil, it is quit:; likely that the total 
supply of foreign cotton ether than Indian and Egyptian will also be larger 
this season than last. The crop in many of these countries, however, is 
harvested much later than in the United States. This, and the lack of crop 
reporting or forecasting agencies similar to the United States Crop Reporting 
Board, make it difficult to determine with a substantial degree of confidence 
the probable 1940 crop at this time. From the standpoint of the probable 
supply of commercial cotton, it is significant to note that in China more raw 
cotton may be consumed this season than last in and about the homes for hand 
spinning and weaving or for padding. This is especially likely if access to 
commercial manufacturing remains restricted. 

The New York Cotton Exchange Service is now estimating that the 1940-41 
world supply of foreign commercial cotton will be nearly l-l/2 million bales 
larger than last season's supply of just over 23 million bales. This would 
make the fifth consecutive year in which the supply of such cotton was between 
23 and 26 million bales. 




\